multichannel connect
careers
all access

News

TCI Ramps Up for Metro Upgrades

1/11/1998 7:00 PM Eastern

Tele-Communications Inc. is ramping up for heavy network
upgrades in five of its major metro properties, saying that vendor selections for
construction are nearly complete.

The five metro properties ripe for a 750 megahertz, two-way
upgrade include: Denver; Houston; Dallas; Tucson, Ariz.; and Chicago. All five projects
start in parallel and extend in phases over the next 30 to 36 months, said Tony Werner,
newly promoted executive vice president of engineering for Tele-Communications Inc.

In a separate but related move, TCI is also close to an
arrangement to sell its half of a design and construction joint venture it formed with
Antec Corp. last May. The 50-50 Antec/TCI company, known as Integration Technologies (IT),
was to be TCI's answer to an aggressive rebuild and upgrade plan that kicked in late
last year.

Instead, TCI in November issued five requests for proposals
(RFPs) to amplifier manufacturers and construction companies, said Werner. A 'hell
week' for qualified respondents was held the week after the Western Show last month,
he said.

'We're in the final stages of negotiating those
deals now,' Werner said last week.

He declined to comment on a possible IT sale. An Antec
spokesman did not return phone calls seeking comment.

But sources close to the discussions said that a large
Canadian company will buy out TCI's 50 percent portion of IT.

One unusual aspect of TCI's metro upgrade plans: a
decision to purchase turnkey construction services from the same vendors supplying network
hardware.

'Several vendors bid on these projects -- both
construction companies and hardware companies,' Werner said. 'They bid on a
per-unit basis, so that includes the cost of installing optical nodes, optical cable,
materials and labor -- everything, turnkey.'

TCI has said it will pursue lower bandwidth, 450 MHz and
550 MHz, upgrades in many markets, reasoning that digital compression techniques afford a
suitable amount of additional bandwidth at a more reasonable price than a full 750 MHz
project.

But in those five key metro markets, Werner said TCI will
step up to 750 MHz, two-way hybrid fiber-coax plant segmented into 500-home nodes and
using distributed feedback (DFB) lasers in the upstream path -- a configuration now common
among MSOs but largely dismissed by TCI last year for cost reasons.

Spencer Grimes, an analyst with Salomon Smith Barney, said
that the 750 MHz metro upgrades are justifiable and expected.

'Cable modems have become perhaps a greater success
than many people initially anticipated, and when you're the controlling partner in
@Home [Network], you want to contribute as many homes as possible,' he said.

TCI has also said it will 'significantly
increase' the pace of its two-way upgrades, not just for data services, but to lessen
the manpower expenses associated with in-home installations of phone jacks for digital
set-tops.

In November and December, TCI added over 250,000 passings
to its two-way-ready list.

Over the past 18 months, TCI's roller-coaster rebuild
and upgrade plan has exasperated hardware vendors who wanted the business, but found
themselves frequently hearing of a new plan.

In late 1996, TCI canceled equipment shipments, which
triggered slim times for key hardware vendors. Last April, TCI activated a $1.7 billion,
30-month budget for fiber, bandwidth expansion gear and return path modules. But at the
time, and until now, TCI kept its bandwidth expansion plans to 450 MHz.

Since then, TCI's aggressive plans to use 24-to-1
video compression gear from IMedia Corp. fizzled, ending in a lawsuit last fall. Now, TCI
is using 12-to-1 compression gear made by NextLevel Systems Inc., and will expand
bandwidth to 750 MHz in its metro markets.

As of the end of October, according to plant capacity
updates shared with financial analysts, about 42 percent of TCI's plant, representing
9.05 million homes passed, runs at 450 MHz or lower.

About 36 percent of its systems, or 8.9 million homes, are
passed by 550 MHz to 750 MHz plant, up from 34 percent last March.

September